Saturday, April 05, 2008

Why EROEI Matters (Part 1 of 5)

This is the first of a five part series of guest posts at The Oil Drum by Professor Charles Hall of the SUNY College of Environmental Science and Forestry and his students and collaborative researchers. Professor Hall has endeavored to update and improve the state of net energy analysis as he believes (as do I), that future energy policy decisions should at least be guided, if not directly steered using biophysical principles. The opinions on the importance of net energy analysis as a tool for addressing our looming energy crisis are quite disparate, but without some science grounded in physical principles, we are left to rely on the market. The unfolding international credit crisis highlights the dangers of relying on strictly fiat monetary measures for biophysical planning – credit and debt can be created with no underlying physical foundation.

There is an implicit assumption, probably believed by most market analysts, that if they (collectively) make good financial decisions, based on market information, market projections and good hunches, then we collectively (i.e. society) will make the best investments possible. Although there are certainly good rationales that such analyses make considerable sense, in many cases it is not so clear to me that they are an effective guide to the future of energy supplies. This is because 1) few understand the degree to which most technologies today are principally a means of subsidizing whatever it is we do with still-cheap petroleum 2) today’s price signals are unlikely to be especially influenced by future conditions when today’s most abundant and cheapest fuels are likely to be much less available, for either geological (depletion) or political reasons 3) current prices of energy in the U.S. are greatly influenced by various subsidies 4) there is painfully little transfer of information from the (rather limited) scientific community that has examined the large picture of energy to the financial communities. We propose to improve the information flow on these issues from the scientific community to the general financial community as well as to the policy world more generally.